Economic Outlook: The status quo

Asking how Tim Geithner did as the U.S. treasury secretary, one week after he has stepped down, is a question of tone and detail.

In the first place, there is a regular heartbeat in the financial district now and this is a business sector that was suffering from a series of coronary setbacks in 2009 when Geithner stepped in as the 75th head of the Treasury.

On his departure, Sen. Sherrod Brown, D-Ohio, said Geithner was "better at putting out the fire than preventing the next one," a response that in part reflects the treasury's opposition to the Safe Banking Act, a bill Brown co-sponsored that would have put a 10 percent cap on any bank's share of U.S. deposits and imposed a 6 percent limit on leverage, The New York Times reported.

It should be said that if you want a bill to limit bank size -- a bill that directly addresses the issue of "too big to fail" -- then you should write a bill that limits bank sizes, rather than, say, a 650-page behemoth like the Dodd-Frank financial overhaul bill that hints in 10,000 ways that banks are too big.

That said, it may be too much to ask for any treasury secretary to take on the culture of Wall Street and of Washington at the same time. "Too big to fail," is a myth beyond measure at this point. It was in 2009 and it is equally true today.

In the era in which "too big to fail" was the most popular rallying cry in Washington, Bank of America bought Countrywide Financial (in 2008) and Merrill Lynch (in 2009). Wells Fargo picked up the ailing Wachovia in 2008 and JPMorgan Chase scooped up the collapsing Bear Stearns and Washington Mutual (both in 2008) with a fair portion of the wheeling and dealing orchestrated by Washington bureaucrats and backed up by an enormous bailout program that fell into Geithner's lap when he took over the Treasury.

How did Geithner manage the question of "too big to fail," is entirely moot. He was put in charge of overseeing the Trouble Asset Relief Program, a $700 billion gift to the banking industry that was widely viewed as a reward for destructive behavior. Further, in keeping with the psychological profile of the addicted to profits behavior, Democrats and Republican spent the next four years going at it tooth and nail while the reckless problem child, the banking industry, just laid low until lawmakers became too exhausted to fight anymore.

Geithner spent the first half of his tenure as treasury secretary working the circuit from congressional hearings to talk shows with the message that TARP was a necessary evil, that we could not fix the economy without first fixing banks and that, like it or not, there simply wasn't another choice in the matter. He then spent the second half of his four years explaining how the $700 billion price tag for TARP was wildly incorrect because the taxpayer was going to make money on the deal.

Since you can't make war and peace at the same time, how could it be asked if Geithner made progress tackling an issue when he was so busy defending the status quo?

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